Schnurman: GM turning failure around

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Jeff Kowalsky/Bloomberg News

This 2005 Saturn Ion is one of the 2.6 million cars General Motors recalled because of a faulty ignition switch. Last month, GM was fined a record $35 million for taking more than a decade to disclose the defect.

For more than a decade, General Motors failed to fix a flawed ignition switch that contributed to at least 13 deaths. There’s no spinning that outcome and no excusing the delays.

But the automaker deserves credit for owning the problem, rather than denying and deflecting. It’s also moving quickly to work with victims and overhaul a broken system.

While GM may always feel a stigma, and deservedly so, it may set a new standard for how a corporation confronts failure.

It commissioned an independent report, released last week, that chronicled one mistake after another. Example: A Wisconsin state trooper diagnosed the ignition defect in 2007, yet GM engineers and lawyers didn’t read his findings until a few months ago.

Last week’s 315-page report cited “an astonishing number of committees” that reviewed the ignition problem without taking action. It described the “GM Nod” and “GM Salute,” bureaucratic gestures meant to appease higher-ups without making any changes.

CEO Mary Barra said the disclosures were painful and disturbing — and necessary.

“I hate sharing this with you as much as you hate hearing it,” Barra told employees last week. “But I want you to hear it. In fact, I never want you to forget it.

“This is not just another business crisis for GM,” she said. “We aren’t simply going to fix this and move on.”

GM dismissed 15 employees, including some senior leaders and the engineer who chose an ignition switch that didn’t meet minimum standards. He later changed the part without changing the part number, which allowed the safety problems to continue.

GM recently hired 35 safety investigators, appointed a vice president of safety and added a program to encourage employees to speak up.

The investigation was led by Anton Valukas, a former U.S. attorney. He and his team interviewed 230 people and had access to 41 million documents. While they were paid by GM, they had complete independence, Barra said.

The Valukas report is often unflinching. It used “failure” or similar words more than 150 times, according to one news account. It also shed light on GM’s legal department and shared information that most companies keep confidential.

Details revealed

“The GM report stands apart for revealing so many details, and that’s helpful,” said Lance Cooper, a Georgia attorney who discovered the faulty ignition switch while working on a wrongful-death lawsuit in 2011.

He’s hopeful that GM’s new approach will prompt others to reconsider their tactics. In most large companies, he said, the litigation strategy is to wear people down, reach a settlement and move on — often without ordering a recall.

GM has taken a hard line in the past, even using bankruptcy as a bargaining chip to settle suits, he said.

Now it’s created a compensation fund and hired Kenneth Feinberg, who administered payment programs for victims of 9/11 and the BP oil spill.

Cooper has refiled the case for the family of Brooke Melton, who was killed after her Chevy Cobalt crashed. He said recent disclosures from GM justify a review of that settlement.

That’s one reason most companies wouldn’t issue such a complete mea culpa: They’re likely to face more suits and payouts.

But GM also could rewrite the scandal playbook, said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.

Despite the growing scandal and recalls, vehicle sales were up 13 percent in May.

“Transparency is the best policy in these circumstances,” Elson said. “It certainly creates a lot more faith in the system.”

One safety expert was not impressed by the report, because it didn’t explain why the flawed switch was selected in the first place. The report called this a “black box design,” meaning that GM let an outside supplier design the part.

There’s no question the engineer knew the switch did not meet GM specs, the report said. But it didn’t blame cost-cutting.

Employees didn’t realize a faulty switch would stall cars, disable airbags and create safety problems, the report said. But that’s hard to believe, said Clarence Ditlow, executive director of the Center for Auto Safety in Washington.

Warning reports

More than 2,000 early warning reports were filed on GM cars involved in the ignition recall, he said. A mechanical engineer who worked for Cooper figured out the switch problem. So did the state trooper and some university researchers.

The Valukas report includes a complaint from a Cobalt owner in 2005.

“This is a safety/recall issue if ever there was one,” the customer wrote. “Even with the slightest touch, the car will shut off while in motion.…

“I firmly believe that this ignition switch needs to be recalled, re-examined and corrected.”

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About Mitchell Schnurman

Mitchell Schnurman has been writing about business news in North Texas for more than 25 years and has been a columnist since 2001. He joined The Dallas Morning News in 2012 after working at the Fort Worth Star-Telegram and Dallas Times Herald. He championed the lifting of the Wright Amendment, supported the American Airlines-US Airways merger and often weighs in on tax breaks for developers. Seven times, he’s been named one of the country’s “Best in Business” columnists by the Society of American Business Editors and Writers.